Research › Search › Judgment

Gujarat High Court · body

2016 DIGILAW 908 (GUJ)

Dharmesh Devchand Pansuriya v. Union of India

2016-04-27

AKIL ABDUL HAMID KURESHI, ALPESH Y.KOGJE

body2016
JUDGMENT : Akil Abdul Hamid Kureshi, J. 1. In these petitions, common questions of law arise. We may record individual facts. 2. In Special Civil Application No. 3144 of 2016, the petitioner, a proprietary concern had established a manufacturing unit in Surat SEZ. The petitioner imported 50 kg. of gold bars by filing bill of entry dated 11.06.2014. The petitioner brought such gold to its unit situated in SEZ without payment of customs duty. 25 kg. out of such gold was sent by the petitioner outside SEZ area on 12.06.2014 without documentation and proper authority, when the vehicle carrying the goods was intercepted by the DIR authorities and the goods were seized. A show cause notice was issued to the petitioner on 02.12.2014 by the Additional Director General of Revenue Intelligence calling upon the petitioner why seized gold valued at Rs. 6.75 crores not be confiscated absolutely and penalty under Section 112(a) of the Customs Act, 1962 ("the Act" for short) not be imposed on the petitioner. The show cause notice also proposed personal penalties and confiscation of the vehicle in which the goods were being transported at the time of seizure. 2.1 Pending such show cause notice proceedings, the petitioner applied to the Settlement Commission on 19.03.2015 and requested for settlement in terms of Chapter-XIVA of the Act. On such application, the Customs Department raised objection of the jurisdiction of the Settlement Commission contending that the goods are such to which Section 123 of the Act applies and that therefore, in terms of the 3rd proviso to Section 127B of the Act, the Settlement Commission would have no jurisdiction to entertain application of the petitioner for settlement. 2.2 The Commission passed its impugned order dated 15.12.2015 and relying on the decision of the Delhi High Court in case of Additional Commissioner of Customs v. Ram Niwas Verma, reported in 2015 (323) ELT, page N. 424, dismissed petitioner's application. 3. In case of Special Civil Application No. 3146 of 2016, the petitioners are manufacturers of textile. They had imported polyester fabrics by filing bill of entries. Subsequently, the Director of Revenue Intelligence conducted inquiries with respect to the said imported consignment of the petitioners. 3. In case of Special Civil Application No. 3146 of 2016, the petitioners are manufacturers of textile. They had imported polyester fabrics by filing bill of entries. Subsequently, the Director of Revenue Intelligence conducted inquiries with respect to the said imported consignment of the petitioners. On the basis of such inquiries, the Additional Director of Revenue Intelligence issued show cause notice dated 06.07.2015 to the petitioners why for the diversion of imported polyester fabrics duty free under EOU scheme and mis-declaration with respect to the same, the value of the goods should not be redetermined and redemption fine in view of confiscation not be imposed. The petitioners were also called upon to show cause why differential duty should not be recovered with interest and penalties. 3.1 Pending such proceedings, the petitioners applied to the Settlement Commission under application dated 14.08.2015 for settlement of the case. On this application also, the Settlement Commission passed the impugned order dated 28.12.2015 holding that it had no jurisdiction to entertain the application of the petitioners. 4. On behalf of the petitioners, learned Advocate Shri P.M. Dave and Shri Paritosh Gupta took us through the statutory provisions and in particular Sections 123 and 127B of the Act. They contended that only if the conditions envisaged in sub-section (1) of Section 123 of the Act are fulfilled, in terms of 3rd proviso to Section 127B of the Act, the jurisdiction of the Settlement Commission would be ousted and not otherwise. They pointed out that the Special Bench of the Settlement Commission had interpreted the said proviso in case of Idris Y. Porbunderwala, reported in 2005 (186) ELT, page No. 356 (Sett. Comm.) by holding that invocability of the provisions of Section 123 is an essential ingredient to determine the applicability of the said section to the seized goods so as to decide whether the mischief of the third proviso to sub-section (1) of Section 127B of the Act would come into play. 5. On the other hand, learned Counsel Shri Hriday such and Mrs. Vaibhavi Nanavati for the Department opposed the petitions contending that the issue is squarely covered by the decision of Division Bench of the Delhi High Court in case of Ram Niwas Verma (supra). The Supreme Court dismissed SLP against the said judgment of the Delhi High Court. 5. On the other hand, learned Counsel Shri Hriday such and Mrs. Vaibhavi Nanavati for the Department opposed the petitions contending that the issue is squarely covered by the decision of Division Bench of the Delhi High Court in case of Ram Niwas Verma (supra). The Supreme Court dismissed SLP against the said judgment of the Delhi High Court. The Karnataka High Court also in case of C.S. India v. Additional Director General, DCEI, Bangalore, reported in 2015 (325) ELT, page No. 91 (Kar.) has independently taken a similar view. They submitted that in any case, in Special Civil Application No. 3144 of 2016, there was seizure of gold on the premise that the shifting of gold outside of SEZ area would amount to smuggling and therefore, even if the interpretation of the petitioners were to be accepted, the petitioners' case would be covered within the exclusion clause contained in the 3rd proviso to sub-section (1) of Section 127B of the Act. 6. In order to resolve the controversy, we may first notice the statutory provisions contained in the Act. Chapter-XIVA pertains to settlement of cases. Section 127A is a definition Section. Clause-(b) thereof defines term "case" as to mean any proceeding under the Act or any other Act for the levy, assessment and collection of customs duty, pending before any adjudicating authority on the date on which an application under sub-section (1) of Section 127B is made. Section 127B pertains to application for settlement of cases. Clause-(b) thereof defines term "case" as to mean any proceeding under the Act or any other Act for the levy, assessment and collection of customs duty, pending before any adjudicating authority on the date on which an application under sub-section (1) of Section 127B is made. Section 127B pertains to application for settlement of cases. Sub-section (1) thereof, which is relevant for our purpose, reads as under:-- "(1) Any importer, exporter or any other person (hereinafter referred to as the applicant in this Chapter) may, in respect of a case, relating to him make an application, before adjudication to the Settlement Commission to have the case settled, in such form and in such manner as may be specified by rules, and containing a full and true disclosure of his duty liability which has not been disclosed before the proper officer, the manner in which such liability has been incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification, under-valuation or inapplicability of exemption notification [or otherwise] and such application shall be disposed of in the manner hereinafter provided;" Provided that no such application shall be made unless- [(a) the applicant has filed a bill of entry, or a shipping bill, or a bill of export, or made a baggage declaration, or a label or declaration accompanying the goods imported or exported through post or courier, as the case may be, and in relation to such document or documents, a show cause notice has been issued to him by proper officer;] (b) the additional amount of duty accepted by the applicant in his application exceeds three lakhs rupees; and (c) the applicant has paid the additional amount of customs duty accepted by him along with interest due under [Section 28AA]: Provided further that no application shall be entertained by the Settlement Commission under this sub-section in cases which are pending in the Appellate Tribunal or any court: Provided also that no application under this sub-section shall be made in relation to goods to which section 123 applies or to goods in relation to which any offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) has been committed: Provided also that no application under this sub-section shall be made for the interpretation of the classification of the goods under the Customs Tariff Act, 1975 (51 of 1975)." 7. In terms of sub-section (1) of Section 127B thus, any importer, exporter or any other person may, in respect of a case relating to him, make an application to the Settlement Commission making full and true disclosure of his duty liability and the manner in which such liability has been incurred. 3rd proviso to sub-section (1) of Section 127B provides that no application under this sub-section shall be made in relation to goods to which Section 123 applies or to goods in relation to which any offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 has been committed. 8. Section 123 is contained in Chapter-XIV of the Act pertaining to confiscation of goods and conveyances and imposition of penalties. Section 111 contained in Chapter-XIV pertains to confiscation of improperly imported goods. Section 112 pertains to penalty for improper importation of goods. Various other Sections contained in the said Chapter pertain to confiscation and penalties under different situations of illegal or irregular imports and exports of goods. Section 122 pertains to adjudication of confiscations and penalties. Section 122A provides that adjudicating authority shall, in any proceedings under this Chapter or other provisions of the Act, give an opportunity of being heard to a party in a proceeding, if the party so desires. Section 123, which is of significance in the present case, reads as under:-- "123. Burden of proof in certain cases.--(1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of providing that they are not smuggled goods shall be- (a) in a case where such seizure is made from the possession of any person,- (i) on the person from whose possession the goods were seized; and (ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person; (b) in any other case, on the person, if any, who claims to be the owner of the goods so seized. (2) This section shall apply to gold, [and manufacturers thereof,] watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify." 9. (2) This section shall apply to gold, [and manufacturers thereof,] watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify." 9. Under sub-section (1) of Section 123 in case of class of goods to which the Section applies, upon fulfillment of conditions mentioned therein the burden of proof that they are not smuggled goods would rest on the owner or person in possession of the goods. Sub-section (2) of Section 23 specifies the class of goods to which the said Section would apply. In context of the provisions of Section 123 we need to appreciate the interplay between the said Section and the 3rd proviso to sub-section (1) of Section 127B of the Act. 10. In plain terms, 3rd proviso to sub-section (1) of Section 127B provides that no application for settlement shall be made in relation to goods to which Section 123 applies. We are not concerned with the later expression contained in the said proviso, viz. to the goods in relation to which any offence of NDPS has been committed. To ascertain to which goods Section 123 applies, one may, therefore, have to peruse Section 123 very minutely. As noted, Section 123 carries title "burden of proof in certain cases". Sub-section (1) thereof provides that where any goods to which the section applies are seized in the reasonable belief that they are smuggled goods, the burden of proof that they are not smuggled goods would be on the person in possession of such goods or the person claiming to be the owner as the case may be as provided in Clauses-(a) and (b) to sub-section (1). In turn, sub-section (2) specifies the class of goods to which the section would apply. Section 123 thus is framed in two parts. Subsection (1) provides for the shifting of burden of proof and the conditions under which such eventuality to the class of goods to which the section applies, would arise. Sub-section (2) merely specifies the class of goods to which the section would apply. Thus, class of goods specified in sub-section (2) are those to which the section itself would apply and if the conditions set out in sub-section (1) of Section 123 are satisfied with respect to such goods, the eventualities of shifting of burden on the owner or person in possession of such goods would arise. 11. Thus, class of goods specified in sub-section (2) are those to which the section itself would apply and if the conditions set out in sub-section (1) of Section 123 are satisfied with respect to such goods, the eventualities of shifting of burden on the owner or person in possession of such goods would arise. 11. 3rd proviso to sub-section (1) of Section 127B incorporates by reference the applicability clause of Section 123. Incorporation by reference is a well known legislative technique to avoid repetition of the same set of words in different sections of the same statute or some times even in different statutes. In essence, therefore, 3rd proviso to sub-section (1) of Section 127B incorporates the applicability clause of Section 123 for the ouster of the jurisdiction of the Settlement commission. It has nothing to do with the eventuality of shifting of burden of proof. It is perhaps because of this reason that the Settlement Commission in the Special Bench judgment in case of Idris Y. Porbunderwala (supra) used the expression "invocability of the provisions of Section 123". There is nothing in the 3rd proviso to subsection (1) to Section 127B which would indicate that it envisaged satisfaction of the conditions for invoking sub-section (1) of Section 123 before the jurisdiction of the Settlement Commission can be ousted. It only refers to the goods to which Section 123 applies. Applicability of Section 123 to the goods and the invocability of the principle of shifting of burden of proof are two independent and distinct issues. 12. The Delhi High Court in case of Ram Niwas Verma (supra) had taken such a view in following terms:-- "7. On a plain reading of the third proviso to Section 127B(1) of the said Act, it is evident that no application for settlement can be made if it relates to goods to which Section 123 applies. Section 123 sub-section (2) specifically provides that the said Section applies to, inter alia, gold. It is, therefore, clear that when the two provisions are read together, no application under Section127B(1) can be made in relation to gold. This case clearly pertains to gold. The respondent made an application, nevertheless, to the Settlement Commission which has entertained the same and has also rejected the plea raised by the Revenue that it did not have jurisdiction to entertain such an application. This case clearly pertains to gold. The respondent made an application, nevertheless, to the Settlement Commission which has entertained the same and has also rejected the plea raised by the Revenue that it did not have jurisdiction to entertain such an application. We agree with the submission made by the learned counsel for the Revenue that the Settlement Commission did not have the jurisdiction to entertain such an application as there was a complete bar provided in the third proviso to Section127B(1) read with Section 123 of the said Act. 8. The learned counsel for the respondent sought to draw some support from a decision of this Court in the case of Commissioner of Customs v. Ashok Kumar Jain 2013 (292) ELT 32 (Del) as also a subsequent decision of another Division Bench of this Court in Komal Jain v. Union of India and Another 2014 (304) ELT 675 (Del). In Ashok Kumar Jain (supra), the issue of Section 123 has not been considered at all. Insofar as the decision in Komal Jain (supra) is concerned, the Division Bench itself, in paragraph 21, observed that the issue with regard to the applicability of Section 123 of the Act by way of the third proviso to Section 127B was left open and it was for the Settlement Commission to examine the same, if such a point was raised, in accordance with law. In the present case, we find that the point with regard to the third proviso to Section 127B(1) read with Section 123of the said Act had been specifically raised by the Revenue and the same has been considered by the Settlement Commission and has been rejected. We have already indicated above that the rejection by the Settlement Commission is not in accordance with law. A plain reading of the provisions clearly indicates that an application under Section 127B cannot be made in respect of, inter alia, gold, which is specifically an item to which Section 123 applies. We may point out that there is no question of examining the provisions of Section 123(1) as also its applicability because that is not the context of the third proviso to Section 127B(1). The said proviso only makes a reference to the goods to which Section 123 applies and not to Section 123 itself. We may point out that there is no question of examining the provisions of Section 123(1) as also its applicability because that is not the context of the third proviso to Section 127B(1). The said proviso only makes a reference to the goods to which Section 123 applies and not to Section 123 itself. We have already made it clear that the goods to which Section 123 applies includes gold, as specifically indicated in Section 123 (2) of the said Act." 13. It is true that in the said case there were allegations of an attempt to smuggle gold. Nevertheless, the interpretation given by the High Court does not turn on this factual aspect. SLP against the said judgment of the Delhi High Court has also been dismissed. 14. Likewise, the Karnataka High Court in case of C.S. India (supra) had also adopted this line of reasoning observing as under:-- "9. Merely because goods in question are exported under a Bill of Entry and as such 3rd proviso would be attracted only to goods imported illicitly or smuggled goods and thereby application filed by the petitioner before Settlement Commission ought to have been accepted by it would be erroneous, inasmuch as, even in cases of clandestine importation, there will be no Bill of Entry and even in such circumstances, an applicability for settlement cannot be filed since filing of Bill of Entry is a condition precedent to entertain an application before Settlement Commission as indicated in clause (a) of first proviso to sub-section (1) of Section 127B of the Act. Hence, even in respect of an application filed in respect of goods to which Section 123 applies though imported through proper channel would not be a ground to entertain such application." 15. Being a central statute bearing tax implications, we would, even otherwise, be slow in taking different view from two reasoned judgments of other High Courts. Even if, therefore, another view was possible, for the sake of consistency, we would have respectfully followed the view of other High Courts. 16. Learned Counsel for the petitioner, however, placed heavy reliance on decision of the Supreme Court in case of J.K. Bardolia Mills v. M.L. Khunger, Deputy Collector, reported in 1994(72) ELT, page No. 813 (SC) and in particular following observations made therein:-- "7. 16. Learned Counsel for the petitioner, however, placed heavy reliance on decision of the Supreme Court in case of J.K. Bardolia Mills v. M.L. Khunger, Deputy Collector, reported in 1994(72) ELT, page No. 813 (SC) and in particular following observations made therein:-- "7. The conditions to be satisfied for application of the provisions of Section123 of the Act are (a) the goods must be one to which Section 123 applies; (b) the goods are seized under the Act and (c) the goods must be seized in the reasonable belief that they are smuggled." 17. In the said decision, question of 3rd proviso to sub-section (1) of Section 127B was nowhere under consideration. Even the observations of the Supreme Court, noted above, are significant, when it is stated that "conditions to be satisfied for application of the provisions of Section 123 of the Act are (a) the goods must be one to which Section 123 applies. Thus, clearly even in these observations, distinction between applicability of the provisions of Section 123 and the goods to which Section 123applies have been recognized. 18. In both cases before us, thus, the Settlement Commission correctly applied 3rd proviso to sub-section (1) of Section 127B of the Act. Petitions are therefore dismissed.